Lane Keeter: Navigating the “Individual Mandate”

Much has been discussed and even litigation filed over the so-called “individual mandate”

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By Lane Keeter

The Sun-Times - Heber Springs, AR

By Lane Keeter

Posted Dec. 28, 2013 at 12:01 AM

By Lane Keeter

Posted Dec. 28, 2013 at 12:01 AM

Heber Springs, Ark

Much has been discussed and even litigation filed over the so-called “individual mandate” included in the law that has popularly become known as Obamacare.

However, I suspect most people have very little understanding of what that entails even at its most basic level. So today’s column is a primer, if you will, of said mandate.

Beginning in 2014, unless your are covered by an exemption, you are required to maintain basic health insurance coverage (known as minimum essential coverage) for yourself and any of your dependents. Failure to do so subjects you to a shared responsibility payment, a fancy way of saying a penalty.

It is the requirement to maintain coverage or pay a penalty that has generally come to be called the "individual mandate."

The penalty is (now bear with me) the lesser of: (i) the greater of a flat dollar amount or a percentage of your household income, or (ii) the national average premium for the lowest-level plan providing minimum essential coverage.

Yeah, it’s that convoluted and there is no way in the scope of this article that I can tell you how much it might be for you. Also, the amounts associated with many of the components of the penalty will change over the coming years.

If subject to it, you must make the shared responsibility payment when you file your federal income tax return. Married individuals who file a joint return for a tax year are jointly liable for any shared responsibility payment.

One strange quirk in the law is that the IRS is not permitted to levy or file a notice of lien with respect to any property of a taxpayer by reason of any failure to pay the shared responsibility payment. The IRS may offset any liability for the shared responsibility payment against any overpayment due the taxpayer, but that’s it.

Thus, if a taxpayer on whom the penalty is imposed is owed a tax refund, the IRS is allowed to reduce the amount of the refund it pays to the taxpayer by the amount of the penalty. But since the IRS isn't allowed to go after the penalty using the collection methods that are otherwise authorized for the collection of taxes, offsetting refunds and credits may be the only practical way for it to collect the penalty.

I couldn’t make this stuff up!

Now, you can satisfy the minimum essential coverage standard (and not be subject to a penalty) if you and your dependent are enrolled in a qualified health plan offered by an Exchange, a qualified employer-sponsored plan (including a government plan), a government plan, such Medicare, Medicaid or CHIP (Children's Health Insurance Program), or any other health coverage plan recognized as affording minimum essential coverage.

If you are an exempt individual, such as a non-U.S. citizen, incarcerated individual, member of certain religious sects or health care sharing ministries or a member of an Indian tribe you will not be subject to the individual mandate.

In addition, low income taxpayers, taxpayers for whom basic coverage is unaffordable and taxpayers who qualify under a hardship exemption are not required to maintain minimum essential coverage. Moreover, under the short coverage gap exception, any individual who doesn't maintain minimum essential coverage for less than three consecutive months will not be subject to the penalty for failure to maintain coverage.

The above is a very simplified explanation of the individual mandate, but hopefully gives you some idea of what you may be facing. This requirement may affect you and your family, so it might be wise to seek the counsel of an insurance professional or other financial advisor.